Social media speculators double Bitcoin value

The value of online currency Bitcoin has exploded as speculators push its trading price above £600 per coin.

The value of the currency has risen sharply-doubling since last week alone- after attracting attention on social media sites such as Reddit and twitter with the worth of the currency gaining  80 times as much real value since the beginning of this year.

Bitcoin, as a virtual currency is completely unsecured by any government wealth or holdings and is valued purely on what people believe it to be worth.

This means the market price can rise and fall relatively short periods of time as confidence or attention ebbs and flows.

The recent interest in Bitcoin began after the closing of the Silk Road sent the currency worth tumbling and sparking sudden awareness of its existence among social media users.

A so-called ‘Deepnet’ or ‘Darknet’ website Silk Road was a controversial online marketplace which was seized by the American Federal Bureau of Investigation (FBI).

The FBI closed the site reporting that it was being used to sell drugs, firearms and other contraband material anonymously. It has also been alleged that the site had been used to arrange contract killings.

The majority of transactions on Silk Road were traded in Bitcoin due largely to the anonymous nature of the currency.

The FBI attempted to seize Bitcoin spent on the Silk Road but it is thought that the majority- now worth several million- is still unaccounted for.

It was initially thought by some that the currency originated from Silk Road but this has been casted in doubt as the report asserting this was withdrawn yesterday.

The currency first emerged in 2009 and operates by cloud storing that transactions of coins from person to person.

Bitcoin’s association with Silk Road has not dampened supporters of the currency who view it as a real alternative to national currencies.

Robert Lons, Co-founder of Bitcoinwebhosting.net, a site offering anonymous website hosting and accepts Bitcoin as payment, said:“Think of the implications of a currency that has no borders, bars no one from entry, and is not controlled by a government.

“At a time when we're seeing just how much power is abused... I think the world is ready for a currency that is decentralized and controlled by the people. But yes, Bitcoin still has a journey ahead of it.

“It needs greater adoption, and more simplicity to appeal to the general public. But then again, the general public should be more informed anyway. Monetary decisions affect them more than the people that make the decisions.”

However sceptics have raised serious concerns over the security of such a currency and the difficulty of regulating its market worth.

Alex Zorach of the Community Currency group Merit Exchange said: “Bitcoin is an interesting idea, but I think their mechanism for regulating the currency supply is fundamentally flawed.

“Because the Bitcoin supply doesn't increase in proportion to the growth or use of Bitcoins, there is a deflationary effect, creating an incentive for people to hoard Bitcoins rather than spend them.

Gresham's Law in economics suggests that for a complementary currency to be successful, it needs to have an inflationary effect that exceeds inflation in the national currency.”

So far governments in the US and China where the majority of speculated currency originates from are leaving Bitcoin away from regulation. The US government has however raised concerns that the currency could be used to launder money from criminal activities.